FHA Proposes To Ban Federal Insurance On Seller-Assisted Down Payments

Washington, D.C. (AHN) - The Federal Housing Administration is feeling the pressure from home loans that used seller-funded down payments.

One-third of the FHA's portfolio is in these loans. The FHA recently booked an $4.6 billion long term loss with these type loans representing a large portion of that.

"We are concerned about this business, because the substantial losses affect FHA's bottom line and FHA's ability to serve American citizens who need access to prime-rate home loans," said FHA Commissioner Brian Montgomery, speaking at the National Press Club according to Dow Jones Newswire.

Congress is looking to modernize the Federal Housing Administration and its rules. The current version of FHA modernization that is in Congress calls for a ban on insuring any loans with seller assisted funding.

The FHA is reopening the public comment period on this proposed rule for 60 days.

"Unless we take action to mitigate these losses, FHA will soon either have to shut down or rely on appropriations to operate," Montgomery said.